Competition is Bad for Unions

by Ramesh Ponnuru

The chief point of my Bloomberg column this week is that increased competition among firms largely explains why fewer and fewer Americans, as a proportion of the population, belong to unions. Changes in labor law or its enforcement, I suggest, have not been major causes of this decline. In passing, I note that the decline of unions does not appear to have reduced labor’s share of national income but that it probably has increased income inequality. But I then return to the main point: Reversing the decline of unions would require drastic policy changes to reduce competition among firms, changes that nobody in mainstream politics advocates and that would be unwise.

Henry Farrell critiques my column. I’ll address his arguments in descending order of strength (as seen by me).

1) I wrote, “The shift [away from unions] has, however, increased inequality among workers, with more rewards going to those with higher skills.” Farrell counters that there is some evidence that de-unionization has done a lot more to increase inequality than just increase rewards to the high-skilled. He is right about that. My sentence did not give a comprehensive picture of the relationship between unionization, skills, and inequality.

2) Farrell suggests that the fact that labor has held on to its share of national income does not disprove the liberal contention that de-unionization has immiserated the middle class. I don’t believe that I claimed that it does, although I can see why he read the column the way. I find the evidence for the liberal contention less persuasive than he does, for reasons that Reihan Salam suggests.

3) To support my main point, I cited two studies co-authored by a pair of academics that suggested that the chief reason the percentage of workers in unions has fallen is that non-unionized firms out-competed unionized firms. Farrell points out that one of my co-authors “appears to have changed his mind in the intervening years, noting that ‘an influx of corporate donations influenced policymakers to oppose pro-union reform of labor law in the 1970s’ and that ‘[p]olitical defeats in the 1970s and 1980s yielded an “enervated” labor law that enabled employers to block organizing campaigns and weaken existing unions.’” I don’t see the contradiction here. It doesn’t seem to me to represent even a slight backing off from the claims that competition between firms was the main reason for the decline of unionization and that changes in labor law were a comparatively trivial driver of this trend.

So, in short, I think that Farrell’s arguments are weakest where they most directly touch my thesis. But he has brought to my attention some interesting studies of which I had not been aware, offered points worth pondering, and helped to provide a fuller picture of recent economic trends.

P.S. Jonathan Chait, linking to Farrell’s post, writes, “Ramesh Ponnuru’s anti-union argument relies on a since-repudiated study.” I don’t think even Farrell goes that far, and obviously I don’t think any such characterization can withstand scrutiny.